conversation with david axelrod where he tells us a little bit about the personal side of president obama. we will see you next week from south carolina. big primary there on saturday. up next for our viewers here in the united states, fareed zakaria, gps. this is "gps "oit global public scare. welcome to all of you in the united states and around the world. i'm fareed zakaria. it's a terrific show we have in store for you today. we begin with what is still the biggest most important story in the world, the economy. two of the world's top economists, paul and ken rogoff with differing perspectives will tell us what they think will happen in america, europe, the emerging markets in the year ahead. after that why in the world is the price of oil so high when

the global economy is so troubled. we'll explain. next up, iraq. the nation is on the brink of disaster according to its former prime minister. i will talk to him about iraq's struggles, and we will ask two participants whether the iraq war was worth it. an important debate. here's my take, first. finally, it looks like former massachusetts governor mitt romney will win his party's nomination, so republicans are following a familiar pattern. they're nominating the mainstream candidate who has waited his turn, the guy who ran once before. this is the party after all, that had a bush or a dole on its ticket for about 20 years. it's also the party that nominated richard nixon on its presidential ticket five times. republicans don't like surprises. there is something surprise about this primary. it's the charges that are working against romney. see, romney's opponents have tried to change his upward trend at two levels. first, they called him a

massachusetts moderate, but is that didn't seem to work. not sure why people perhaps think that romney is more electable because he is moderate than his opponents once he gets to the general elections. but a second line of attack does seem to be gaining traction. that of romney as job killer. romney as the private equity guy who buys companies, hollows them out and outsources jobs. >> a story of greed. >> it's strike this attack is coming in a republican presidential primary. after all, what romney did was classic capitalist creative destruction. he took over businesses, tried to make them more productive. to do so, he often had to shed jobs. other start-ups like staples, he created jobs. republicans should be celebrating romney's work as an example of how the market functions. driving out inefficiency, generating productivity, creating a lean, mean capitalist machine. but something has changed in america. even in the republican party there is a huge concern about what globalization and

technological changes are doing to the average middle class american. there is a sense that the system is not working for the median american worker. if you look at job creation over the last 20 years in america, you will notice that we haven't been able to create any jobs in what is called the tradeable sector of the economy. those jobs that are subject to global competition. the jobs we've created have almost entirely been in industries like health care, government, construction, which are basically local industries shielded from global competition. you can't outsource the building of a new york skyscraper to a chinese worker. you can't outsource a nurse. the other great force coursing through the economy, technology, has created new companies, but it's had a more mixed record in creating tens of thousands of new jobs. note, this is not a partisan point. we've netted no new jobs in over 20 years. that's under obama. under the bush years with tax cuts, under clinton with balanced budgets and deregulation. most americans sense that we're in a new world. romney's opponents are taking

advantage of this anxiety in their attacks, but none of them really have answers to deal with this problem. simply talking about cutting government spending isn't going to make the american worker more competitive in the face of these challenges from technology, from globalization. hopefully during the general election, we'll have a real national debate about how to create jobs in america. now, before we get started, i have great news for you. gps is back on itunes. if you ever miss a show, just go to itunes.com/fareed, and can you buy it, or subscribe and make sure you never miss one again. okay? let's get started. ♪ why much of the media and much of america was focused on primary voters and the tiny town of new hampshire this weesh. everyone knows that the november elections won't be determined by those results. they will be determined by what

happens in the american economy, and to talk about that i am joined by paul krugman of the "new york times" and princeton university and ken rogoff of harvard university. let me begin, paul, by asking you about a column you wrote in which you talked about mitt romney and bain capital and the fact that he had not created a lot of jobs. he had destroyed them. it struck me that it was somewhat unfair because bain capital seems to be, of all the private equity companies, not one of these companies that loads on a lot of debt on its other companies it takes. it often acts as an early stage investor, almost more like a venture capital company. steve ratner was a democrat, worked for obama, says that actually if you look at bain capital's record, it's quite remarkable. it's mostly about having spotted successful companies and steered them well. >> pi it's actually wrong to think about bain as having created or destroyed jobs. on balance, it led to the

destruction of relatively good jobs, and replaced them with jobs that are worse. no different -- this is what private equity has done to a large extent in the u.s. economy. i don't think bain stands out as an especially bad member of that industry, but that industry is doing stuff that is good for corporate bottom lines, but not terribly good for workers. the main point is that romney is saying i should be president because i know how to create jobs, and he actually does know how to make a lot of money in private equity, which is not at all the same thing as creating jobs. it's not all the same thing as what's involved in running macroeconomic policy. the main point is not that he was an especially evil private equity investor. we don't think so. it's that that has basically zero relationship to what he would have to do as president, and it's an industry that is a somewhat mixed -- the industry has arguably not been one of the things that -- whose overall impact has been positive on

america. >> let's regard the big issue, which is going forward what the economy is going to look like and what the debate is going to be. paul, you had a column and a very striking graph where you point out that if you ask yourself what has the market told us over the last three years, you know, the market's verdict has been that the united states, which engaged in a big stimulus program and then the fed did quantitative easing and quantitative easing too has found that its borrowing costs have just fallen and fallen and fallen. >> that's right. people are actually willing to basically pay the u.s. government to keep their money safe, which suggests that the market, at any rate, is not at all worried about u.s. sole vensy. it would suggest that even leaving aside the whole question of multipliers and whether you can create lots of jobs, this would be a really good time to do a lot of public investment because you can borrow the money for zero or negative cost. it's a pretty spectacular contrast with the rhetoric in washington. listening to the discussion in

washington you think that we're on the virj of a debt crisis that we have an intolerable crippling deficit, but market, people are putting money on the line, and they're saying, you know, we're not worried about that, and we can't see any better use for our money, so, here, please take it. >> ken, what do you think? it is now three years. it's not a few months. it's -- the trend is pretty consistent. you can't say that this is like subprime or something that people didn't know about. this is all we've been talking about for three years. yet, the interest rate keeps dropping. in other words, the market is saying, you know, we're not worried about an american debt crisis. away we're worried about is very slow growth in the united states. correct? >> well, i mean, for one thing, interest rates are not an incredibly great predictor of what's going to happen in the future. ice land was borrowing at low interest rates in 2006. you can point to lots of others. this has been studied a lot, and it's hard to find evidence that they really can predict what's going on. of course, debt levels are

surging. not just in the united states, but across the advanced countries. i think it's important not just to look at public debt, but to look at the total picture on debt, which just looks like nothing we've ever had before. we're already at general government debt above world war ii, but you throw in private debt which often becomes public debt. we're very familiar with that. i don't think it's nuts to be worried about debt and to just point at the interest rates and say, well, this isn't a concern. i think it's too easy. >> if i can -- first of all, i think that the relevant thing here or at least what i have been doing is looking a lot at japan, which is -- japan in the 1990s was kifr a dress rehearsal for us now, and japan has been subject to people warning of an imminent debt crisis for a long time now. i mean, s&p downgraded them in 2002, and nothing happened, which is what -- why some of us successfully predict thad when s&p downgraded america nothing would happen. of course, there are risks.

there might be something that we don't know. it may be that although japan was able to get up to gross debt of 200% of gdp and still borrowing at an interest rate of less than 1%, maybe the united states would be different from that, but that's a potential danger that we're -- it's not apparently weighing very heavily right now, and the fact is meanwhile we have massive unemployment. we have -- how heavily do you weigh something that might happen, but that history kind of suggests probably won't happen very soon against something that is the clear and present damage that's being done by a weak economy. >> economic, we're going to continue with this. i want to ask two things. one is what you think your best prescription would be for the president, but also, the u.s. economy is going to be determined by something outside the u.s., which is europe. paul and ken, you're going to solve the european crisis when we get back. doesn't it bother you that no one notices you?" and i'm like, "doesn't it bother you you're not reliable?" and they say, "shut up!" and i'm like, "you shut up."

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we are back with economist

paul krugman and ken rogoff. your prescription to president obama, i take it, is run on investment, run on the idea that you're going to borrow more, spend more, that that is what the economy needs right now, not woerdz about the deficit. >> yeah. i think in a way we may be approaching an advantageous approach to that. there are signs that private demand is starting to get some traction. we've had -- our housing bust has gone on so long, that we appear to be under housed. we are kind of short on units. people can't afford them because there's no jobs, but if we had higher employment, you could imagine a reinforcing cycle of growth. it won't happen if the government is bulge back, if we're pursuing austerity and thwarting any recovery, whereas right now is about the time or next year when a push could be

the thing that tips us into a self-sustaining recovery. what would be advise mitt romney? i don't know if you are advising -- >> i'm not. >> what would be the kind of right of center platform. >> the right of center platform. i mean, i actually agree on the point of doing infrastructure spending, but the question -- i don't think it's just about increasing aggregate demand, which i'm much less impressed by that argument because this has gone on so long. why hasn't the market cleared? i believe in -- this has been a long time. i think infrastructure spending would be good, education. you want to do it well. there need to be new ideas. i'm want saying president obama hasn't offered them too, both sides. we need to do from a structure spending that gets infrastructure built at a reasonable price. someplace we need to go. something we need to do. if we're going to spend money on education, it can't just be, you know, paying more to get the same thing done. there's a lot of ideas out

there, and i feel it's been a very static debate, and it's, you know, paralysis in washington, but there are things we need to move forward on running things better than we do. >> how do you create jobs in the tradeable sector? in other words, yeah, you know, everything people talk about sounds to me like infrastructure jobs, construction jobs, health care is going to go up no matter what we do. maybe some government workers. the thing that the american economy used to at least legendarily produced lots of, these powerhouse manufacturing service jobs, high paying jobs, you know, that -- that is where the trend has gone down tore 20 years and how do you revive that? >> i don't think we will on manufacturing. i mean, agriculture used to be more than half of the people worked in agriculture. now it's a couple of percent. manufacturing is trending down. i think for similar reasons. there are exports jobs in service industries where we have the rule of law information, technology, things like that, where i think our future lies,

but the world has changed. >> let's talk now about the place that can throw all this in turmoil, europe. in the european case, paul, i take it -- i understand that the argument that people now are understanding that you can't just have savage austerity prabz programs and expect everything to bounce back because these economies go into downward spirals. it seems like in many of those countries, they were having difficulty borrowing, and if they don't do something to convince the markets that they're getting their fiscal house in order, their borrowing costs will go to 78%, 8%. are they in a catch 22 they can't get out of? >> it's actually worth noting that essentially nobody has managed regain the confidence of the markets, except for, you know, latvia, which had almost no debt. even the most sav abbing austerity programs aren't getting confidence back. i think the answer to this is that the debtor countries in

europe cannot solve this on their own. if it's only about -- if the only policy in europe is austerity in southern europe, then that's just a losing proposition. you're going to depress the economy enormously. they're not even going to do as much about redousing their budget deficit as they want because the economies are repressed and tax revenue. >> it's not going work. >> it's not going to work. they need help. the only way you can save the euro is tore approximate there to be expansionary policies at the europe-wide level, and, in fact, some inflation of the european wide level that makes this a tolerable adjustment. >> which means the european central bank should do what the fed did, which is a massive quantitative ease zooshg in fact, europe almost surely, because it's different countries and these adjustment problems, they almost surely need a higher rate of inflation than we do. we can manage probably with 2% or 3%. they probably need 3% or 4% to make it workable. >> would you agree with that? >> actually, i do on the inflation. i think it would be helpful here. i think it would be very helpful

there. the germans don't want it. quaint taifsh easing -- it's more like we're buying california debt or missouri debt. it's complicated and political. they're running this union without a real constitution. it's as if we lived with the articles of confederation, and we were trying to run our government with that, and they need to fix that. i mean, they're pouring water into a leaky bucket here. you need to fix that. probably i think a couple of the countries at least probably need to go on sabbatical from the euro because they're not competitive. i don't think it can work within their framework or anything close to it. >> when i look historically at countries that get into this problem, it seems like the only thing that seems to work is you get your labor more competitive. >> absolutely. >> and you deappreciate your currency, which is related. >> a big piece of what works. >> we have this great chart about, again, the -- what did you expect? it's basically how rates went down, and its default countries that look at u.s., japan, japan, sweden, all have control over

their own currency and have printing presses. >> the one i find that's really amazing is denmark, which is actually having lower borrowing costs to finland, even though they like ekwifl went. it's peg toed the euro. everybody knows that they have those printing presses if they need them. >> right. >> that makes an enormous difference. >> nobody would worry about italian debt if they had their own ecb? >> we worry about italian debt back when they had their own currency, but they would be able to get a 20% valuation of the lira. they wouldn't be subject to speck lavsh attacks by people who were selling italian debt because they're afraid other people are going to sell italian debt. >> the common currency is a little like a couple and they're living together. not quite sure if they want to get married. let's try out having a checking account together. that's instead of that coming next. that's basically what they've done, except it's not just a

couple. it's 17 first cousins, second cousins, third cousins, and it's not a workable system. i think that's what people see. >> on a scale -- on a probability basis, how likely is it that the euro blows up? this year you have $1 trillion of european debt that has to be rolled over this year. >> i think it's not this year that it's going to happen. they're finding ways basically by having the european central bank buy everything to push it out into something bigger and worse down the road, raising interest rates. they have the capacity to have the european central bank buy stock, and that's happening indirectly, it's buying the debt. that can go on for a while. i think it will not be decisive in our election. >> probability for blow-up over -- >> i don't know if there will be a blowup in europe this year, but there will be a recession, and that will, in fact, hurt us, so it will be a drag on the u.s. economy. you know, it may not be enough. there are -- there is some sign of developing strength in the u.s. economy, but there's going

to be -- i think it's going to be a fairly nasty recession in europe. i think people think it's going to be short and shallow. they're wrong. why would it be? i think the big blow up -- i'm not sure the big blow upwill happen because in the end, you know, the prospect of hanging concentrates the mind. the prospect of a collapse of their greatest initiative ever may make the europeans do what needs to be done eventually, but not before they actually have to. >> on that note, paul krugman, ken roghoff, thank you very much. up next, a curious economic problem that impacts your bank balance when demand drops and supply stays constant, prices should fall, right? oil prices are soaring. what in the world is going on? next. tdd# 1-800-345-2550 let's talk about fees. tdd# 1-800-345-2550 there are atm fees. tdd# 1-800-345-2550 account service fees. tdd# 1-800-345-2550 and the most dreaded fees of all, hidden fees. tdd# 1-800-345-2550 at charles schwab, you won't pay fees on top of fees.

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>> the next time you pay $3.50 for a gallon of gas, think about basic economics. when demand is low is and supply is strong, prices should fall, right? now apply that to oil. people drive less in the winter. the american economy is slow. the euro zone has stalled. china and india are slowing down. so demand for oil worldwide is low. so why is oil trading at $113 a

barrel? more than twice the price it was trading at five years ago when the global economy was booming. what in the world is going on? there's a school of thought that suggests the global economy is doing better than we think. china and the u.s. are proving resilient to europe's problems, and traders are expecting renewed demand in the world's two top economies. another school of thought argues we're in the midst of a bubble. speculators have been driving up the price of oil and eventually it will crash. now, i think that the economic fundamentals really can't justify oil prices at their current levels. the real driver of high oil is nott the stuff you find in the business section of the newspaper. the demand for oil in india or china. it's on the front pages, global politics. you see, traders worry about risk, and the biggest risk to oil supplies is the threat of war in the persian gulf. meanwhile, in nigeria mass

protests are raising worries about the supply of fuel from there. venezuela is a slow motion collapse because of hugo chavez's mismanagement. there have also been protests in russia, the world's top oil producer, and, remember, the fallout of the arab spring. libya's oil production in 2011 was severely curtailed. iraq continues to disappoint with its oil output, and its recent political tennings certainly haven't made things any better, so a mix of war rhetoric and local troubles in key oil states are factors driving up the price of crude. that translates to higher prices at the pump. now, that logic suggests that prices will fall when the news calms down. maybe from iran and from russia, but perhaps not. perhaps oil producers want these sky-high prices. usually the major oil producers understand that keeping prices too high in the short-term means people start finding alternatives to oil.

they start driving more efficiently. they start looking for alternative energies. this time oil states face crucial challenges. look closer at the arab spring. the only oil-rich country that has been forced into regime change is libya. why? the gulf state's lavish subsidies and salary increase on their citizens. they've upped spending to record levels to suppress any popular discontent. i saw some striking numbers this week. look at the break even costs for the world's top oil producers. that is the minimum price at which these countries need to sell oil so that they can balance their budgets. russia now needs oil at $110 a barrel to manage its finances. for iraq the number is $100. even saudi arabia now needs oil to trade at $80 a barrel to balance budgets. qatar, oman are the same. saudi arabia was able to balance its budget with oil prices

averaging around $25 a barrel. now it is in these countries' interests to keep oil prices high, which they do by curtailing supply in one we or the other. this is perhaps the most lasting impact of the year of global protest. high oil prices. so bottom line, an oil crash seems unlikely. even though the engines of global growth are sputtering, be prepared for a period of expensive commutes. maybe it's time to trade in your suv for a prius. we'll be right back. okay, team! after age 40, we can start losing muscle -- 8% every 10 years. wow. wow. but you can help fight muscle loss with exercise and ensure muscle health. i've got revigor. what's revigor? it's the amino acid metabolite, hmb to help rebuild muscle and strength naturally lost over time. [ female announcer ] ensure muscle health has revigor and protein to help protect, preserve, and promote muscle health. keeps you from getting soft.

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sxwroirchlgts file tore a check of today's top stories. the captain of the ill-fated italian cruise ship defended his handling of the situation after the ship hit submerged rock friday evening saying they were not marked on his map. meanwhile, an italian prosecutor told reporters this morning that authorities have ordered the black boxes from the ship to be seized. they expect to complete their analysis in the next few days. at least three people are dead and 17 others still missing. at least nine people were killed and 26 others wounded today in bombings targeting

police stations in iraq. iraqi police say an area near the predominantly sunni city of ram addy was the scene of a series of attacks involving a car bomb explosion followed by a raid by gunmen. the attack on the police station was wif several bombings in the area today. the head of the united nations is telling syria as president to stop killing his own people. the demand from ban ki moon comes as the fact-finding mission comes to a conclusion. more than 5,000 people died when the uprising began last year. the alaskan town trapped by ice. the ice breaker qatar healy accompanied the tanker renda as it travelled through frozen waters to the town of gnome. it's delivering fuel because ice formed over the baring sea. >> less than one month after the

last u.s. troops left iraq, its leaders are fighting along sectarian lines, and there has been a spate of deadly bombings across the country. iraq is in turmoil, my next guest says it is on the brink of disaster, and he would know. he has served as interim prime minister of iraq. he is now the leader of one of the main iraqi political parties. alawi is part of the shia community, but he is a rare secular figure in iraqi politics. he joins me now from baghdad. pleasure to have you on. >> thank you. >> let me start with a question that is not directly related to iraq. when you were prime minister, you had to deal with iran and so you have some sense of that government. do you understand what is happening in iran right now? do you feel that there is a real danger of some kind of confrontation with the united states? would they shut down the straits of hormuz?

>> i don't think they'll go that far. however, they are using this as rhetoric, but iran needs to change its attitude. it needs to change its performance in the region, i think. they should be less threatening. they should reconsider their policies. otherwise, what iran is doing can lead also to greater risk in the region. >> tell me about iran's influence in iraq. there are many people who believe that the iranian regime retains a great deal of influence. you know, the two main shia political parties, the prime minister's party and the other one, are both -- were both heavily influenced by iran, have received funding. does -- is iran playing an increasing role in the politics of iraq?

>> definitely we can see this very clearly. we have seen it after the elections immediately when iran used its influence and dictated what kind of government there should be in iraq. they put a red line against me and against the iraq -- and unfortunately, the united states went along with what iran desired, and we want them -- this interference in iraq's affairs, is going to lead the country, iraq, to larger and more significant problems in the future. this is what's happening now. >> how is the domestic situation in iraq going to end up? the prime minister is trying to arrest the vice president. the vice president has fled to the kurdish areas. how will things resolve? >> well, let me tell you are frankly, there are lots of

problems now. the whole situation is very tense. sectarianism is coming back and forth in this country. i think that iraq is passing through the most dangerous phase through its history now, and i have warned in the very early days -- in fact, years ago that sectarianism and having a vacuum and having a political process which is not inclusive can only destroy the future of this country, and we needed and still need an inclusive political process and full blown institutions in this country. unfortunately, both do not exist. president obama said very clearly that the united states have left iraq as a stable and democratic country. it's neither stable nor democratic, frankly speaking.

it's very -- the terrorists are hitting again very severely. al qaeda is fully operational now in iraq. we can see with the various explosions that are claiming the lives of innocent people every day, and we are seeing the unconstitutional behavior of the government. >> do you want us back? do you think there is a snar glow which the united states can return to iraq in some -- with some military presence? >> the united states, frankly, still have a lot of leverage on iraq. it still has a lot of goodwill, and the united states have political as well as moral responsibility to help this country to pass through this very difficult phase. as part of the world leadership, the united states must do something to help iraq. i am not asking for the american forces to come back, but for the

united states to use its diplomatic and other channels for the strategic agreement between the united states and iraq to try and bring about sanity to the political process and inclusivity, and i think there should be frank and real discussions with the prime minister between him and between the administration to make it very clear that what is happening in iraq is not acceptable and there should be a way forward by getting inclusivity to the political process and by adhering to the constitution and respecting the constitution. >> ayad alawai, thank you for joining us. always a pleasure. up next, was the war in iraq worth it for america? we have a debate. stay with us. can spark romance anytime. and when it does, men with erectile dysfunction can be more confident in their ability to be ready with cialis for daily use.

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we're back to talk more about iraq. nearly a decade on what has america accomplished. was the war worth it? joining me now max boot, a military historian, a senior fellow on the council of foreign relations and sometimes advisor to foreign relations. he has written two books on

iraq, including the end of iraq, how american incompetent created a war without end. welcome. max, looking at it historically, i know you are a passionate advocate of the war. you were a passionate supporter of general petraeus, but you look back. >> this is so critical the way it was kekt conducted for the first few years, i might add. >> when you look back, though $1 trillion, however many iraqi lives, 4,000 american lives. what did we gain? >> i think we gained an opportunity, but whether we will, in fact, take advantage of that opportunity remains to be seen, and on current events i would say no. there's no question that the cost of the war has been high in both blood and treasure, but that's been true of many other wars. the korean war, what did we get out of the korean war, divided peninsula, 38,000 dead, huge costs? today south korea is a paragon

of democracy. 50 years ago. if iraq were to develop -- >> ally desperately wanted the united states over which we had enormous influence, that modelled its -- that took enormous amounts of advice, aid, and assistance from. the iraqi got is anti--american openly. they refused to have -- its parliament refused to pass the normal status of operating forces agreement that would have allowed the u.s. to stay, and much of iraqi politics is conducted on a kind of anti-american basis, so where is the analogy? the problem is that we didn't -- we don't have a south korea. not as south korea circa 2011, but a south korea circa 1953. >> i think that's an over-simple fiction. even in the case of south korea, there was a lot of anti-american sent mept, but if you look at iraq, and, yes, there's no question there's anti-american sentiment, and sometimes for good reason, because they blame

us for overthrowing the previous regime and not imposing law and order, which is a legitimate charge, but i think there is also widespread roiz recognition in iraqi politics that they need us. >> how would you answer the question from 30,000 feet? >> well, from the point of view of iraq, i think actually the country has -- is better off. after all, 60% of iraq's people are shiites. they were brutally repressed from the founding of iraq until the day that saddam hussein was overthrown. today they now run iraq. they are not pro-american. in fact, baghdad is now tehran's closest ally in the world, but that really reflects what the shiite population wants. another 20% of iraq's population are kurds. they have dreamed from the founding of iraq to the present moment of having their own independent state. today they basically do. they have their own parliament, their own army, their own

judicial system. you don't need a visa to go to kurdistan, but you do to go to iraq. it is an -- except for having a fleaing at the u.n., it's an independent country, so they're delight. of course, they were also spared almost all the violence. it's a small segment of the iraqi population. the sunnis and even ornl only part of them that are worse off, but kwet is for the united states was this worth $1 trillion? 4,000 dead and many thousands more permanently injured. to do what? to go into iraq and to leave a situation where we have a deposit in baghdad that has s closely allied with our number one adversary in the world, iran? we also did great damage to the prestige of the united states, to have argued that we had to combat -- we had to invade because of iraqi wmd, and then the incompetent of the occupation, particularly in the early period. the spectacle of the united

states standing aside as baghdad was looted. all these things damaged america's standing in the world, and, you know, these resources. the resources -- the trillion dollars has added to the national debt. they're also national rich security resources that might have been -- we might have devoted to other problems. >> how would you respond to this issue of the time, the distraction, the mind share of the american foreign policy establishment, the resources were all devoted to iraq for a decade? >> well, there's no question that we took our eye off the ball in some areas, including afghanistan, but i would argue that as a great power, we should have the ability to operate in more than one theater at once, and i don't think there is anything necessarily inevitable about the dire outcome in the early years in iraq. certainly we went into the war based on a misapprehension about saddam having wmd, which was a lie that he fed into his own people and to the world to try to enhance his ora of power.

that backfired against him, and then we initially had tremendous success which turned into a catastrophic failure because we did not send enough troops to stabilize the situation and impose the kind of near term regency as we go in places like bosnia and kosovo. i think the bush administration deserves blame for making that mistake, and then not realizing the errors of its ways until 2007. then we did change policy and did implement the srj. violence plunged more than 90%, and iraq has since then has had a semi-functioning democracy, but now of course what's happened since then is in the last few months, since the withdrawal of american forces, the political process is once again screeching to a halt, and that's the great danger here is that we have made tremendous progress since 2007. we have created the opportunity to create a functioning democracy in the middle east and one that i don't think is necessarily a cat's paw, the iranians, but now we're eeg losing that opportunity because we're losing influence by taking our troops out. we are handing iraq to the

iranians and making it much more likely that democracy will cease to function. >> let me press you on the iran issue because it isn't really that clear that the iraqi government is tehran's closest ally. they've been somewhat accommodating on the syrian issue, but other than that, the iranians ask for the most favored trade status. they didn't get it. they maintained pretty close relationships with the united states. the iranians haven't gotten any special deals on oil. i mean, will national interest and national rivalries insure that iraq has a healthy degree of -- after all, most iraqis remember iran as a company that fought an eight-year war. >> well, the iran-iraq war, you know, was something in which you had a sunni dictator and sunni general sending shiite foot soldiers to fight, but when the elections were held in iraq in

2005, the first free elections -- and they were very much free elections. the shiites in iraq voted almost unanimously for the two political parties that were supported by iran. dawa and the supreme council for the slammic rel use in iraq which was founded in iran, and there are very close ties. look at the proposed sale of f-16 aircraft to iraq. iran doesn't object. in fact, i this i they're delight. they might even get access to the technology. turkey doesn't object. the kuwaitis i think are quite scared, but they aren't saying anything. the people who are really concerned and speaking out are the kurds. iraqis. they are afraid, given the history of that country, that the weapons will be used against them, and i suspect the sunnis are also quite nervous about it. >> we have to close on that. max boot, peter, thank you very much. we will be back.

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today we'll take a trip to italy for our question from the "gps" chal epg. the question is according to a report released by an italian business group this week, which of the following is now the

biggest bank and the biggest lender in italy? is it, a, the vatican, b, the mafia, c, silvio berlusconi, or, d, the coins in the trevi fountain. we'll give you the correct answer. go to cnn.com/fareed for more questions. while there, check out the offerings on our global public square website. there's always fresh content, insight, and analysis on what's ghog the world. don't forget, can you follow us on twitter and facebook. by the way,on that front, i have a very exciting announcement. if you ever miss a show, you can now find full video episodes of "gps" for sale on the itunes tv store. go directly there by typing itunes.com/fareed into your browser. you can get them individually or you can subscribe and get ten shows in a row for less than $1 a show. this week's book of the week was written by max boot, my guest from earlier, and whether you agree with him or not on iraq,

his book "war made new" technology, warfare, and the course of history is worth your time. it's a sweeping look at how the west has been so successful in warfare over the past 500 years, but also points out how technology has really been at the heart of so many important turning points and turning trends in history. now for the last look. this is certainly not my idea of fun, but the south korean soldiers sure seem to be smiling as they follow frolic half naked in the snow. just letting off some steam after the racheting up with tensions to their neighbors to the north? nope. these special forces soldiers are actually preparing for war with north korea. about 250 of them this week were embroiled in these tests of raw endurance to prove themselves in war-like conditions. half naked soldiers did push-ups, skied with their rifles, and took a dip in icy cold water. all to test their physical and spiritual abilities. not to be outdone, female members of the special forces